When AstraZeneca‘s (LSE: AZN) (NYSE: AZN.US) management rebuffed Pfizer‘s $120bn, or £55 per share offer, some investors celebrated but others expressed frustration.
Around 10% of Astra’s shareholders have publicly backed the board’s decision to reject Pfizer’s offer. However, another 10% of the company’s investors are now calling for the company to reopen negotiations with Pfizer and push for a better deal.
The group spearheading the drive to get Pfizer and Astra back to the negotiation table, is headed by Astra’s sixth largest shareholder, Legal & General Group, one of the UK’s largest pension fund managers.
It’s not over yet
There is still time for the two companies to make a deal, which is now a real possibility as shareholder cries for further negotiation are getting louder by the day.
Still, due to the nature of Pfizer’s offer, under UK takeover rules, the two companies only have until Monday to enter talks or the offer will expire. If the offer does expire, then Pfizer is not allowed to approach Astra with another offer for at least six months.
Unfortunately, Monday is a bank holiday both here and across the pond, so it might be a long weekend for both parties if they do decide to head back to the table and thrash out a deal.
It’s not as simple as hiking the price
Realistically, the chances of a deal are slim. Astra’s management has stated the minimum price that they would accept from Pfizer is £59 per share but under takeover rules, Pfizer is not allowed to increase its offer to this level.
Nevertheless, Pfizer can change the structure of the deal, in order to make it more attractive for Astra’s shareholders. For example, Pfizer can raise the cash element of the deal, which at present stands at only 45%. If Pfizer upped its offering to £55 per share in cash, it’s possible that the majority of the company’s shareholders would be willing to make a deal.
Additionally, although Pfizer cannot increase its offer, the company can add what’s known as a contingent-value right. With a contingent-value right, Astra’s investors could receive an additional payout, either cash or shares, in the event of an experimental drug being approved.
Not only would this type of deal allow Pfizer to raise its offer for Astra but it would also work as a sweetener for Astra’s investors, some of whom believe that they would miss out on the company’s future potential if it was acquired.
However, one thing is certain, Pfizer is not allowed to increase the value of its total offer above £55 per share, so any deal will take time to negotiate. But will the two companies have time to cut a deal?
If there's no deal
If Astra and Pfizer don't head back to the negotiation table, it's going to be some time before Astra's sales return to growth.
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Rupert does not own any share mentioned within this article.